With $ 13,000 in support of the price of Bitcoin, knowing what to do isn’t easy. When the price of Bitcoin drops dramatically, we know we have to buy. Of course, in times of panic, buying requires a certain strength of character. It takes a lot of determination to buy when fear has fallen victim to others. Sometimes it’s not just about being brave. In many cases the price is very attractive, but we don’t have the means. The price may be shallow, but if we run out of Fiat, we’ll be fried.
For the long-term investor, buying Bitcoin is of course never a major dilemma. Apart from fluctuations in price, Bitcoin is always cheap for the uptrend. An old Bitcoin proverb says: The best time to buy Bitcoin is yesterday. This belief stems from the fact that in 10 years’ time, buying at $ 11,000 or $ 13,000 won’t be very relevant. A good hodler buys often and waits patiently. The ideal situation is to forget about the price.
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For investors, patience is a hedge against volatility. We can’t fall into price fever because it can give us a heart attack. There is something that every bitcoiner needs to understand. Bitcoin is a high risk asset. This “Safe Haven” story is pure propaganda. Let’s not fool ourselves. An asset as lucrative as Bitcoin cannot guarantee security. Bitcoin’s high profitability is closely related to its volatility. And when there is volatility, there is a financial risk as bitcoin can hit $ 19,000 one day and $ 4,000 a month later. Can such an unstable asset provide security?
The Chinese “safe haven” story is not only wrong, but also dangerous. In fact, I would say irresponsible. We cannot play with people’s investments by presenting a false reality. This space is not always sincere. Because many have a political agenda. And those who do not accept the anti-establishment libertarian narrative will be branded a traitor. We are constantly told that Bitcoin is a safe investment and many investors fall for it. Then, when the price of Bitcoin drops dramatically, regret comes. In fact, many feel betrayed by the false promises and then we have a legion of disaffected people talking about bitcoins everywhere.
Is Bitcoin a “safe haven”? According to a study by Bluebanx, 74.5% of respondents said they are “afraid of losing everything that is invested in cryptocurrencies”. However, 96% also believe that cryptocurrencies are more profitable than traditional options. What does that tell us? Well, despite the official rhetoric, investors don’t see cryptocurrencies as a safe haven, but rather as high-risk assets, but with plenty of opportunities.
As I mentioned earlier, long-term investor strategy isn’t that complicated. A capital is placed in Bitcoin and then expected. The amount should be appropriate according to our financial capacity. In other words, the usual recommendations. Do not buy Bitcoin with credit. Do not use money that is intended for our essential expenses. And not to put all of our assets in Bitcoin. Why? Because Bitcoin is an extremely volatile asset (risk). It may be $ 13,000 today and $ 10,000 tomorrow. Eye!
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A safe haven is something else. Safe havens are primarily characterized by their stability. The dollar, government bonds and triple-A bonds are considered safe precisely because of their stability. These shelters are not particularly profitable assets, but they offer security as their price does not fluctuate. This doesn’t apply to stocks like stocks or Bitcoin.
In other words, the price of Bitcoin fluctuates. And I’m afraid it fluctuates quite a lot. Here we have two options. The first is denial. This means that Bitcoin is a safe investment that one will inevitably suffer from. Or we can embrace reality and take action. That said, we need to develop a strategy that takes into account that it is a volatile and unpredictable asset.
What to do in the event of price fluctuations? One way is to do nothing. That means buying and waiting and ignoring short-term fluctuations. Another option is to become a price junkie. Sell, buy, and make predictions like crazy. This option is not recommended.
Of course there is a third option. It is possible to have a long-term strategy while playing a slightly more active role. Assuming we buy bitcoin on a regular basis, it is best to buy on average. So don’t think so much about the current price, the maximum or the minimum, but rather the average of the price (the average of the 7, 30, 90, 200 days). This means that we always buy at different prices, but create an average (which ultimately corresponds to the Bitcoin average).
Now we know that there are rare days when the price suddenly falls well below its average. If the price drops dramatically, we can buy a little more that day. On the other hand, we can sell a little if the price goes up a lot. We are not allowed to sell everything. We only sell in proportion to the increase. Let’s say the price went up 30% and our portfolio went from $ 100 to $ 130. Well we can sell $ 10.
With that $ 10 we can create a fund that we can buy when the price drops. What are these extraordinary days? It is easy. There are no more than 20 of these days a year. And madness invades the press and social networks. The signal lies in the mood indicators (extreme greed, extreme fear).
What is the next frontier? Everyone wants to read a prediction. But it is a mistake to think in predictions. It’s not about Bitcoin hitting $ 14,000 or $ 20,000 in a few days. It’s about strategy. What should I do? Buy, sell or hold? To keep? Yes. To buy? Yes, but very little. With caution. To sell? Yes, but a little. And when it goes up, it sells a little more.
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The problem with these sudden manifestations is that they fill our souls with greed. So we believe that because of the simple fact that Bitcoin has gone up, it will go up in price indefinitely. And we are tormented by the idea of missing out on an opportunity. One solution might be to keep most of the investment intact but sell a little at the height of the excitement. If it goes up more, we’ll sell a little more.
For those interested, this strategy is known as “Dollar Cost Averaging” and is a perfect investment system for those who want to invest in Bitcoin with long-term results without long-term complications. I added the sale or purchase during the exceptional days. Such a fun change. Considering that we are in one of those “extraordinary” moments.